In this guide
Once you retire and transfer your superannuation into a retirement phase pension account, planning how you access your savings is extremely important.
It can create opportunities later in life to make additional super contributions and increase the amount you have in retirement phase where the fund earnings remain tax free.
To understand why this is an important issue, we need to first revisit a few superannuation fundamentals including:
- The difference between pension payments and lump sums
- The transfer balance cap rules and how they operate
- How different super payments affect your transfer balance account.
What is a pension?
The term ‘pension’ refers to an ongoing obligation to make a series of payments from a super fund where each ongoing payment relates to the others.
For instance, if a member makes a written request to commence a pension and receive a regular payment each month from their fund, then these monthly payments would be pension payments.
The same could be said if the member elected instead to have these payments made weekly or fortnightly or even if they elect for only one pension payment annually from their fund. These would all be considered pension payments due to the ongoing obligation for the trustee of the fund to make these payments, with each payment in the series relating to the other payments.
The key is having the appropriate documentation in place at the start of the pension.
What is a lump sum?
In contrast to pension payments, a ‘lump sum’ refers to a one-off payment from a super fund on the written request of a member. Once paid, there is no ongoing obligation to make any further payments.
